TaxTMI Updates e-Newsletter
Oct 12,2019

Pre-deposit condition for maintaining appeal - stay of recovery pending appellate orders - encashment of bank guarantee - expeditious disposal of stay application

Pre-deposit condition for maintaining appeal - expeditious disposal of stay application - Petition directing the appellate authority to consider the stay application upon the petitioner making the prescribed 10% pre-deposit and to pass orders within a stipulated time - HELD THAT: - The Court directed that the petitioner shall pay 10% of the disputed tax as a condition for maintaining the appeal before the 5th respondent within two weeks. Upon such payment and receipt of a copy of this judgment, the 5th respondent is required to consider and pass orders on the stay application after hearing the petitioner, and to do so within one month. The direction is aimed at enabling the petitioner to pursue the appellate remedy while ensuring the statutory pre-deposit requirement is complied with, and at securing an expeditious adjudication of the stay request by the appellate authority.

Petitioner to pay 10% pre-deposit within two weeks; 5th respondent to decide stay application after hearing and within one month of receiving copy of judgment.

Stay of recovery pending appellate orders - encashment of bank guarantee - Order staying recovery proceedings, including steps to encash the bank guarantee, until the appellate authority passes and communicates orders on the stay application - HELD THAT: - The Court directed that to enable the petitioner to pursue the appellate remedy, recovery pursuant to the impugned order and any steps to encash the bank guarantee shall be kept in abeyance until the 5th respondent decides the stay application as directed and communicates the decision to the petitioner. This preserves the petitioner's position pending adjudication of the stay application and prevents pre-emptive enforcement measures until the appellate authority exercises its discretion.

Recovery and encashment proceedings to be kept in abeyance until the 5th respondent's orders on the stay application are passed and communicated.

Final Conclusion: Writ petition disposed by directing the petitioner to make the 10% pre-deposit within two weeks; the 5th respondent to hear and decide the stay application within one month of receipt of this judgment, and recovery actions including encashment of the bank guarantee to remain in abeyance until such orders are communicated.

Release of confiscated conveyance and goods subject to payment of tax and penalty - confiscation and penalty under the GGST Act - e-way bill non-generation - integrated goods and services tax paid at import

Release of confiscated conveyance and goods subject to payment of tax and penalty - integrated goods and services tax paid at import - Interim release of the intercepted truck and the goods contained therein was directed. - HELD THAT: - The court noted that the petitioner had tendered all documents except the e-way bill at the time of interception, had payment of integrated goods and services tax at the time of import, and thereafter paid the tax and penalty as computed by the respondent authorities. In view of these facts and the immediate generation of the e-way bill, the court granted ad-interim relief by directing respondents to forthwith release the specified conveyance together with the goods, subject to the final outcome of the petition. The relief is interlocutory and limited to the interim period pending final adjudication. [Paras 4]

Respondents directed to forthwith release the truck GJ-12-AZ-5184 and the goods contained therein, subject to final outcome.

Confiscation and penalty under the GGST Act - e-way bill non-generation - The validity of the notice in Form GST MOV-10 proposing confiscation under section 130 of the GGST Act was not finally adjudicated and was left for further proceedings. - HELD THAT: - Although the respondents had issued a notice in Form GST MOV-10 for confiscation of the goods or conveyance and levy of penalty under section 130 of the GGST Act, the court did not determine the merits of that proposal. Instead, the court issued notice in the petition and provided interim relief to the petitioner while leaving the question of the propriety of the confiscation notice and any substantive adjudication under section 130 to be considered on the returnable date and in the ordinary course. [Paras 3]

Notice issued in the petition; the question of confiscation under section 130 is reserved for adjudication on the returnable date.

Final Conclusion: On the petition, ad-interim relief was granted directing immediate release of the intercepted truck and its goods subject to the petition's final outcome, while the validity of the confiscation notice under section 130 of the GGST Act was not decided and remains to be adjudicated on the returnable date.

Summary order. Interim directions: affidavits in opposition to be served on petitioners within three weeks; petitioner permitted to file affidavit in reply; affidavits to be accepted on the adjourned date; matter listed on 13th September, 2019.

Suspension of time frame for filing appeal - interim relief - condonation of delay / extension of limitation - affidavit cum undertaking taken on record

Extraordinary and discretionary jurisdiction of High Court - maintainability of appeal - Single Judge directing the appellant to exhaust the statutory remedy - whether the appeal requires to be decided on merit or not? - Section 115-O invoked unilaterally and without adjudication by treating the transactions as that of dividend, which would not come within the purview of Section 2(22)(d) - HELD THAT: - The Supreme Court recorded an Affidavit cum Undertaking filed on behalf of the petitioner and issued notice returnable on 14.10.2019. Pending further consideration of the petition, the Court suspended that portion of the Division Bench order of the High Court which had granted a period of four weeks from receipt of the order to file an appeal before the Appellate Authority. The Court also granted liberty to serve the learned Standing Counsel for the Department and directed additional service to the designated standing counsel.

The four week period granted by the High Court for filing an appeal is stayed (suspended) pending further consideration; notice issued.

Final Conclusion: Notice issued; interim suspension of the High Court's four week extension for filing an appeal, affidavit cum undertaking taken on record and matter listed on 14.10.2019.

Disallowance of expenses on consumption and replacement of stores and spares - capital expenditure OR revenue expenditure - characterization and allowance of losses on fertilizer bonds - non-applicability of TDS u/s 194H (and consequent section 40(a)(ia) disallowance) - HELD THAT:- Issue notice, returnable on 25.11.2019.

Mr. Manish J. Shah, learned Advocate accepts notice on behalf of the respondent and, as such, no notice need be served on the respondent. He prays for and is granted two weeks’ time to file affidavit in reply.

Rejoinder, if any, be filed within a week thereafter.

List this matter for disposal on 25.11.2019

Refund arising from assessment order - adjustment against stayed demands - ministerial or technical/systemic impediment not a legal bar to refund - manual payment by authorised officer where system fails - statutory interest on delayed refund

Refund arising from assessment order - adjustment against stayed demands - ministerial or technical/systemic impediment not a legal bar to refund - manual payment by authorised officer where system fails - statutory interest on delayed refund - The petitioner is entitled to the refund arising from the assessment order for Assessment Year 2014-15 and the refund cannot be withheld on the ground that the departmental computer system will not permit adjustment because other demands stand stayed. - HELD THAT: - The assessment order dated 25.02.2019 gave rise to a refund claim which the department does not dispute on merits. The departmental contention that auto-generation of refund could not be effected because the central processing system would not accept that other demands are stayed is a ministerial/systemic difficulty and does not operate as a legal bar to payment. Where demands for other assessment years are not enforceable (being stayed or otherwise not recoverable), they cannot be set off against an entitlement to refund by leaving the refund unpaid on account of a technical glitch. The correct legal position obliges the department to effect the refund; if the computerized mechanism fails to do so, the authorised officer must make the payment manually. The petitioner is also entitled to statutory interest on delayed payment of the refund. [Paras 2, 6, 7, 8]

Respondents directed to release the petitioner's refund of Rs. 224,28,74,090/- with statutory interest, and to do so within two weeks from receipt of the order; if the system does not permit auto-generation, the authorised officer shall make payment manually.

Final Conclusion: The petition is allowed: the refund arising from the assessment for Assessment Year 2014-15 must be released with statutory interest within two weeks, and departmental technical difficulties cannot be relied upon to withhold payment; the department is expected to remedy systemic impediments to avoid similar litigation.

Revision under Section 264 of the Income-tax Act - order under Section 197 of the Income-tax Act - directions for expeditious disposal - reasoned decision - pendency causing prejudice - remedies preserved

Revision under Section 264 of the Income-tax Act - order under Section 197 of the Income-tax Act - directions for expeditious disposal - reasoned decision - remedies preserved - Direction to Respondent No.1 to decide the petitioner's pending revision petition under Section 264 relating to the order dated 10.05.2019 under Section 197 for financial year 2019-20 within six weeks. - HELD THAT: - The petitioner's limited grievance was the continued pendency of a revision petition under Section 264 against the order dated 10.05.2019 under Section 197 for financial year 2019-20, which was asserted to cause day-to-day prejudice. Having heard the parties, the Court directed Respondent No.1 to decide the pending revision petition within six weeks and to do so by a reasoned order. The Court expressly refrained from making any observations on the merits of the revision petition and preserved the petitioner's statutory remedies in the event of dissatisfaction with the order ultimately passed. The petitioner was directed to appear before Respondent No.1 on the specified date for directions, reflecting the limited and procedural nature of the relief granted. [Paras 2, 3]

Respondent No.1 to decide the pending revision petition under Section 264 by a reasoned order within six weeks; no merit adjudication; petitioner's remedies preserved.

Final Conclusion: Writ petition allowed to the limited extent of issuing a direction for expeditious, reasoned disposal of the pending revision petition under Section 264 relating to the order dated 10.05.2019 (Section 197) for financial year 2019-20 within six weeks; merits not adjudicated and statutory remedies reserved.

Reopening of assessment - notice under section 148 - mechanical sanction / borrowed satisfaction - approval by higher authorities for reassessment - client code modification in securities/commodity trading - addition by way of income on account of contrived transactions - burden of proof to establish income arising from facilitation of contrived losses

Reopening of assessment - mechanical sanction / borrowed satisfaction - notice under section 148 - approval by higher authorities for reassessment - Validity of reassessment proceedings initiated by issuance of notice under section 148 where approvals were recorded mechanically - HELD THAT: - The Tribunal examined the proforma approvals placed on record and noted that the approving officials had recorded brief, ritualistic entries such as "satisfied" and "Yes, it is a fit case to issue notice u/s. 148" without application of mind. Reliance was placed on the decisions of the Delhi and M.P. High Courts which hold that the safeguard of approval by a higher authority requires at least a brief reflection of satisfaction based on objective material and cannot be a mere formal or mechanical endorsement. Where approval is given in a mechanical manner and the sanctioning authorities do not apply their mind, the statutory precondition for issuance of a notice under section 148 is not satisfied and the reassessment proceedings are invalid. Applying that principle to the facts, the Tribunal found the approvals in the present case to be mechanical and accordingly held the reassessment proceedings to be contrary to law and liable to be quashed. [Paras 9]

Reassessment proceedings and the notice under section 148 quashed for want of valid, non-mechanical approval.

Client code modification in securities/commodity trading - addition by way of income on account of contrived transactions - burden of proof to establish income arising from facilitation of contrived losses - Validity of the addition made by the Assessing Officer on account of alleged client code modification - HELD THAT: - On the merits, the Tribunal considered the reasoning of the Hon'ble Bombay High Court in PAT Commodity Services which held that even if client code modification enables clients to claim contrived losses, the Revenue must establish that the assessee earned income (for example by way of commission or other consideration) from such transactions before making an addition to the assessee's income. The Assessing Officer in the present case had added the entire amount of the doubtful transactions to the assessee's income without demonstrating any income earned by the assessee from facilitating those transactions. Following the Bombay High Court's approach, the Tribunal held that the addition on account of client code modification was not justified in the absence of evidence of income accruing to the assessee from those transactions. [Paras 10, 11]

Addition on account of client code modification set aside; grounds raised by the assessee allowed on merits.

Final Conclusion: The appeal is allowed: the reassessment proceedings initiated by issuance of notice under section 148 are quashed for mechanical approvals, and on merits the addition made on account of client code modification is set aside; the assessee's appeal is allowed.

Deduction under section 80P(2)(b) of the Income-tax Act - Co-operative society - sales to federal society vis-a -vis outsiders - Construction of fiscal incentive provisions liberally to advance objective - Remand for quantification and verification in light of coordinate bench decision - Disallowance under section 40(a)(ia) and its effect on assessable profits - Interest under section 234B is consequential and mandatory

Deduction under section 80P(2)(b) of the Income-tax Act - Co-operative society - sales to federal society vis-a -vis outsiders - Construction of fiscal incentive provisions liberally to advance objective - Claim for deduction under section 80P(2)(b) in respect of profits on sale of milk sold to parties other than federal society was not finally adjudicated but remitted to the Assessing Officer for computation and decision in accordance with the Tribunal's coordinate-bench reasoning. - HELD THAT: - The Tribunal noted that on the facts the assessee, a cooperative society, sold substantial quantities of milk to parties not covered by section 80P(2)(b) because the federal society (Mahananda) lacked processing capacity and could not accept the entire produce; this factual position was not controverted by Revenue. Relying on the coordinate-bench decision in Fattesinghrao Naik (Appa) Sahakari Dudh Utpadak Sangh Ltd. v. ITO, the Tribunal accepted the principle that incentive provisions like section 80P should be construed liberally to further the cooperative sector and, where the assessee was compelled to sell in the open market due to federal society's incapacity and the perishable nature of milk, deduction could be allowed on such sales subject to quantification rules. The coordinate bench held that deduction may be allowed on sales to outsiders but limited to the lesser of the actual open-market sale price or the price at which milk was sold to the federal society, and excluded months where there was no sale to the federal society. Applying that reasoning, the Tribunal directed that the Assessing Officer recompute the deduction in line with that decision, after considering the assessee's submissions and verifying facts and prices month-wise. [Paras 6, 7, 8]

Issue remitted to the Assessing Officer to decide and quantify the deduction under section 80P(2)(b) in line with the coordinate-bench decision, allowing benefit where justified but subject to the lower-of-price limitation and exclusions as indicated.

Disallowance under section 40(a)(ia) and its effect on assessable profits - Validity and tax effect of the disallowance under section 40(a)(ia) was not finally adjudicated but remitted to the Assessing Officer for verification and decision in the light of relevant precedent. - HELD THAT: - The Tribunal observed that the Assessing Officer had made a disallowance under section 40(a)(ia) without adequately recording the details of payee or the reason for disallowance; having regard to the proposition in the cited Gujarat High Court decision that a disallowance for failure to deduct TDS increases the profits of the assessee and such increased profits may be eligible for deduction under section 80P, the Tribunal directed the Assessing Officer to examine the disallowance afresh, verify particulars, and decide its impact on computation of profits and deduction under section 80P in accordance with law. [Paras 7]

Matter remitted to the Assessing Officer to examine and decide the disallowance under section 40(a)(ia) and its consequence for section 80P deduction, in accordance with law and the cited authority.

Interest under section 234B is consequential and mandatory - Claim challenging charge of interest under section 234B was rejected. - HELD THAT: - The Tribunal observed that charging of interest under section 234B is consequential upon the assessment and is mandatory where applicable; since the interest liability followed from the assessment consequences, the contention that the disallowance was disputable did not warrant relief against the statutory levy of interest. [Paras 8]

Ground challenging levy of interest under section 234B dismissed.

Final Conclusion: The appeals are allowed in part: for A.Y. 2014-15 the Tribunal partly allows the appeal for statistical purposes by remitting the section 80P(2)(b) claim and the section 40(a)(ia) disallowance to the Assessing Officer for fresh examination and quantification in accordance with the coordinate-bench decision and relevant precedent; the plea against interest under section 234B is dismissed. The appeal for A.Y. 2015-16 is allowed for statistical purposes on the same lines.

Additions on account of bogus purchases and unexplained expenditure under section 69C - statements recorded under section 132 not constituting incriminating material unless relatable to seized material or subsequent inquiry - in completed assessments under section 153A additions require incriminating seized material - opportunity of cross-examination as element of natural justice where assessment is based on third party statements - claim for deductions under sections 10AA/10A and interplay with assessments under section 69C/section 115BBE - disallowance under section 36(1)(va) in respect of delayed employee contributions to PF/ESI where payments made before filing return

Additions on account of bogus purchases and unexplained expenditure under section 69C - statements recorded under section 132 not constituting incriminating material unless relatable to seized material or subsequent inquiry - in completed assessments under section 153A additions require incriminating seized material - opportunity of cross-examination as element of natural justice where assessment is based on third party statements - claim for deductions under sections 10AA/10A and interplay with assessments under section 69C/section 115BBE - Deletion of additions made by AO treating a portion of purchases as bogus under section 69C and related denial of deductions under sections 10AA/10A/115BBE for AYs 2010-11 to 2012-13. - HELD THAT: - The Tribunal upheld the CIT(A)'s deletion of additions where the AO relied solely on a third party statement recorded in a different search and made no reference to incriminating seized material; in completed assessments framed under section 143(3)/153A additions can be sustained only with reference to incriminating material found during the search. The statement of the third party (Shri Rajendra Jain) alone was not sufficient unless it was relatable to material discovered in the search or corroborated by subsequent inquiry. Further, absence of opportunity to cross examine the witness rendered reliance on that statement a serious flaw affecting natural justice. The AO himself had sought and obtained confirmation from SEZ/customs authorities as to genuineness of purchases, which tipped the preponderance of probability in favour of the assessee. On merits the CIT(A) also observed that treating a percentage of purchases as bogus would be revenue neutral in the circumstances. The Revenue did not contest the CIT(A)'s legal conclusion on assessment framed under section 153A/143(3). For these reasons the additions were deleted and the consequent challenge to allowance of deductions under sections 10AA/10A (and the invocation of section 115BBE) failed. [Paras 2, 3]

Grounds of Revenue challenging deletion of additions and allowance of deductions for AYs 2010-11, 2011-12 and 2012-13 dismissed; additions deleted.

Disallowance under section 36(1)(va) in respect of delayed employee contributions to PF/ESI where payments made before filing return - Deletion of addition made by AO under section 36(1)(va) for alleged delayed deposit of employees' contributions to PF/ESI for AY 2012-13. - HELD THAT: - The CIT(A)'s deletion of the addition was affirmed. The Tribunal accepted the assessee's case and binding precedents of the Jurisdictional High Court and the Supreme Court that payments of employees' contributions to PF/ESI made belatedly but on or before the due date for filing the return under section 139(1) cannot be disallowed under section 36(1)(va) (read with section 43B). In view of these authorities and the fact that payments were made before filing the return, the AO's disallowance was held unsustainable. [Paras 4]

Ground of Revenue disallowing PF/ESI contributions for AY 2012-13 dismissed; addition deleted.

Final Conclusion: The Revenue's appeals are dismissed; additions and disallowances challenged for AYs 2010-11 to 2012-13 are deleted and the CIT(A)'s orders are affirmed, with no order as to costs.

Penalty under section 271AAB - Discretionary nature of penalty / 'may' v. 'shall' - Definition of "undisclosed income" in explanation to section 271AAB - Application of section 274 (opportunity to be heard) to penalty proceedings - Deeming provisions in sections 69/69B not extendable to section 271AAB - Validity of show-cause notice and principles of natural justice

Penalty under section 271AAB - Discretionary nature of penalty / 'may' v. 'shall' - Application of section 274 (opportunity to be heard) to penalty proceedings - Levy of penalty under section 271AAB is not mandatory and is to be imposed on the merits of each case after giving opportunity to the assessee. - HELD THAT: - The Tribunal followed the Coordinate Bench view that section 271AAB begins with 'Assessing Officer may direct' and thereafter provides that 'the assessee shall pay', indicating discretion vested in the AO. Sub section (3) imports the procedural safeguards of sections 274 and 275, requiring issuance of a show cause and reasonable opportunity to the assessee before imposing penalty. Consequentially, once the assessee is heard, imposition of penalty is a judicial decision to be taken on the facts and circumstances of each case rather than an automatic consequence of a statement recorded under section 132(4). The Tribunal observed that penal provisions must be strictly construed and that the AO's discretion must be exercised reasonably in light of the materials placed before him. [Paras 12, 14]

Penalty under section 271AAB is discretionary and not mandatory; it must be imposed on merits after complying with procedural safeguards under section 274.

Definition of "undisclosed income" in explanation to section 271AAB - Deeming provisions in sections 69/69B not extendable to section 271AAB - Entries of cash advances/advances for purchase of land recorded in a diary do not, without more, qualify as 'undisclosed income' within the explanation to section 271AAB and therefore do not automatically attract penalty under that section. - HELD THAT: - The Tribunal examined the explanation to section 271AAB which contemplates income represented by money, bullion, jewellery or entries representing an inflow of funds not recorded before the date of search. A cash advance denotes an outflow of funds and cannot be equated with an undisclosed inflow of income merely by reference to diary entries. The Tribunal held that deeming provisions under sections 69/69B, which may treat certain amounts as income for assessment purposes, cannot be extended automatically to the penal scheme of section 271AAB. Absent corroborative incriminating material or particulars establishing that the diary entries represent undisclosed income as defined in section 271AAB, penalty cannot be sustained on such advances. [Paras 13, 14]

Penalty under section 271AAB deleted insofar as it was levied on cash advances/advances for purchase of land recorded in the diary.

Penalty under section 271AAB - Definition of "undisclosed income" in explanation to section 271AAB - Jewellery/silver physically found in excess of declared wealth that qualifies as undisclosed income under the explanation to section 271AAB can attract penalty; the penalty on excess silver was sustained. - HELD THAT: - The Tribunal distinguished between diary entries of advances and tangible assets discovered on search. Jewellery or silver physically found and not disclosed on or before the date of search falls squarely within the explanation to section 271AAB as income represented by bullion/jewellery. Contentions about past acquisition, gifts or inheritance relate to source and quantum and are relevant to the assessment or mitigation of penalty, but do not negate that such material represents undisclosed income for purposes of section 271AAB. On the facts, the AO and CIT(A) had applied the statutory tests and levied penalty at the applicable rate; the Tribunal confirmed that levy in respect of excess silver. [Paras 16, 17]

Penalty under section 271AAB confirmed in respect of excess silver found on search.

Final Conclusion: The Tribunal held that penalty under section 271AAB is discretionary, to be imposed on merits after following the procedure under section 274; applying that principle, penalty imposed on cash advance diary entries was deleted as such entries did not qualify as 'undisclosed income' under the explanation to section 271AAB, while the penalty in respect of excess silver physically found on search was confirmed. The appeal is accordingly partly allowed.

Mandatory draft assessment order under Section 144C(1) - non-equivalence of show-cause notice to draft assessment order - jurisdictional invalidity of assessment for non-compliance with mandatory procedure - quashment of assessment as legal nullity where statutory mandate not followed

Mandatory draft assessment order under Section 144C(1) - non-equivalence of show-cause notice to draft assessment order - jurisdictional invalidity of assessment for non-compliance with mandatory procedure - Final assessment order passed without furnishing the draft assessment order required by section 144C(1) is without jurisdiction and liable to be quashed. - HELD THAT: - The Tribunal held that sub section (1) of section 144C mandates that where the Assessing Officer proposes a variation prejudicial to the assessee on or after 01.10.2009, a draft of the proposed order must be forwarded to the assessee before a final order is passed. The Assessing Officer in the present case made ALP based additions following the TPO's directions but did not prepare or furnish any draft assessment order as contemplated by section 144C(1). The issuance of a show cause notice by the AO before making ALP adjustments was found not to be a substitute for the draft assessment order, because equating a show cause notice with the statutorily required draft would render section 144C(1) redundant and deprive the assessee of the right to file objections before the Dispute Resolution Panel. Relying on and following binding precedents of coordinate Benches and High Courts (including the decisions discussed in the judgment), the Tribunal concluded that non compliance with the mandatory procedure under section 144C(1) vitiates the assessment in substance and renders it a legal nullity; such defect is not curable by later steps such as issuing a corrigendum or by treating procedural lapse as curable under general provisions. Consequently, the assessment order passed under section 143(3) read with section 144C was quashed for lack of jurisdiction. [Paras 14, 15]

Impugned assessment order quashed and set aside for failure to furnish the draft assessment order as required by section 144C(1); issuance of a show cause notice is not a substitute for the draft order.

Final Conclusion: The Tribunal allowed the appeal, quashed the assessment order passed under section 143(3) read with section 144C for failure to furnish the mandatory draft assessment order under section 144C(1), and dismissed the remaining grounds as rendered infructuous.

Deduction under section 57(iii) - commercial expediency - nexus between expenditure and income - allowability of interest expenses on borrowed funds advanced to related concern - ordinary prudent businessman test

Deduction under section 57(iii) - commercial expediency - nexus between expenditure and income - allowability of interest expenses on borrowed funds advanced to related concern - Whether interest expenditure incurred on unsecured loans taken and used to advance loans and make investments (including interest free advances to a related concern) is deductible under section 57(iii). - HELD THAT: - The Tribunal examined the factual material and authorities and found that the assessee had raised funds by unsecured loans and had utilized those funds for advancing loans to others and for investment in a related company, M/s Finesse Jewels Pvt. Ltd., where the assessee was director and shareholder. The records furnished (including bank statements and details of interest paid and received) established that the borrowed funds were employed for the purpose of earning income under the head "income from other sources" or for business purposes and not for personal use. The Tribunal applied the principle that expenditure laid out "wholly and exclusively" for the purpose of making or earning income under section 57(iii) is deductible, and that it is not necessary that the expenditure actually produce profit - what is required is the primary motive and a direct or reasonably proximate nexus between the expenditure and the income sought to be earned. The Tribunal further accepted that advances made to a related/sister concern out of commercial expediency (including interest free advances) do not per se convert the interest on borrowed funds into a nondeductible personal expenditure; the correctness of the transaction must be judged from the standpoint of a prudent businessman. Having regard to the documentary evidence and precedents relied upon, the Tribunal concluded that the requirements of section 57(iii) and the test of commercial expediency and nexus were satisfied and, therefore, the disallowance of interest was not justified. [Paras 11, 12, 15, 21, 22]

The disallowance of interest expenses was deleted and the assessee's claim under section 57(iii) was allowed.

Final Conclusion: The appeal is allowed: the Tribunal deleted the addition made by the AO and confirmed by the CIT(A) relating to disallowance of interest under section 57(iii), holding that the borrowed funds were applied wholly and exclusively for earning income and that advances to the related concern were made out of commercial expediency.

Taxability of a disputed refundable amount pending grant of refund - real income versus hypothetical income (real income theory) - accrual of income requiring a corresponding liability of the payer - allowable deduction under section 43B on actual payment - entries in books of account not conclusive for taxability - inapplicability of deemed income provision where liability was discharged

Taxability of a disputed refundable amount pending grant of refund - real income versus hypothetical income (real income theory) - accrual of income requiring a corresponding liability of the payer - entries in books of account not conclusive for taxability - Whether the Countervailing Duty (CVD) claimed as refundable but rejected by Customs and first appellate authority constituted income of the assessee for the year under appeal and could be added to the total income. - HELD THAT: - The Tribunal accepted that the assessee had paid the CVD and had sought refund before the Customs authorities relying on the decision in M/s. SRF Limited , but noted that the refund claim had been rejected by the Assistant Commissioner of Customs and dismissed on first appeal. Applying the settled principles that income-tax is a levy on real income and that hypothetical or contingent claims are not taxable, the Tribunal relied on the tests articulated by the Supreme Court in cited precedents such as CIT v. Excel Industries Ltd. and earlier authorities reproduced in the impugned order, namely that income accrues only when it becomes due and there is a corresponding liability on the other party to pay. The Tribunal held that mere book entries or treatment of the amount as income by the assessee do not make a contingent claim real income. It also observed that section 43B entitles deduction on actual payment and that the deeming provisions invoked by the assessing officer (section 41(1) as relied upon by the AO) were not applicable where the liability had been discharged and the refund claim remained unaccepted. On the facts, since the customs refund was denied up to the first appellate stage and no enforceable right to receive the amount had vested in the assessee, the claimed refundable amount did not constitute income of the assessee for the year under consideration and could not be added to taxable income merely because it had been shown as recoverable or as income in the books. [Paras 5, 6]

Addition of the disputed refundable CVD was deleted and the appeal was allowed.

Final Conclusion: The Tribunal held that a disputed refund claim which had been rejected by the Customs authorities (including first appeal) did not amount to accrued income in the hands of the assessee for AY 2016-17; the addition made by the AO and confirmed by the CIT(A) was deleted and the appeal was allowed.

Allowability of interest as business expenditure - proprietorship not a separate legal entity - proof of utilisation of personal loans for business (cash flow/loan trail) - tax audit under Section 44AB as proof of business accounts - rule of consistency in successive assessments

Allowability of interest as business expenditure - proprietorship not a separate legal entity - tax audit under Section 44AB as proof of business accounts - proof of utilisation of personal loans for business (cash flow/loan trail) - rule of consistency in successive assessments - Deductibility of interest of Rs. 10,06,209 claimed in the assessee's personal accounts for unsecured loans taken personally but alleged to have been invested in two proprietorship concerns - HELD THAT: - The Tribunal examined the AO's disallowance and the CIT(A)'s confirmation. The AO disallowed the interest because the interest and related loan were not shown in the audited accounts of the proprietorship businesses and therefore, in his view, could not be treated as business expenditure; the CIT(A) affirmed on the alternate ground that the assessee failed to demonstrate utilisation of the personal loans for business by producing a cash flow/loan trail. The Tribunal noted that the assessee maintained separate balance sheets for two proprietorship concerns and for himself personally, and that the consolidated position showed investments in the proprietorship concerns significantly exceeding the assessee's own funds, with borrowed funds reflected in the balance (indicating that the proprietorship investments were met from borrowings). The Tribunal accepted the legal proposition that a proprietorship concern has no separate legal personality from its proprietor and concluded that accounting the interest in the proprietor's personal books does not by itself defeat its character as business expenditure if the funds were in fact invested in the business. The Tribunal found that requiring inclusion of the loan and interest specifically within the audited business accounts or insisting on a cash flow trail was unwarranted on the facts, especially where the balance sheet position and subsequent acceptance of identical interest claims in later assessment years supported the assessee's claim. Applying the rule of consistency and the factual inference from the balance sheets, the Tribunal held the interest to be an allowable business expenditure.

Assessee's claim of interest of Rs. 10,06,209 for AY 2012 13 is allowable as business expenditure and the appeal is allowed in part.

Final Conclusion: The Tribunal set aside the disallowance and allowed the interest claimed by the assessee for AY 2012 13, holding that the loans taken personally and invested in the proprietorship concerns supported deduction as business expenditure and that the AO/CIT(A) erred in requiring the interest to be shown exclusively in the audited business accounts or by a cash flow trail.

Service of notice under section 143(2) of the Income tax Act - validity of assessment framed under section 143(3) read with section 147 - mandatory time limit/proviso to section 143(2) - distinction between issue of notice and proof of service under section 292BB

Admission of additional grounds in appeal proceedings - Additional grounds challenging absence of notice under section 143(2) were admitted by the Tribunal. - HELD THAT: - The Tribunal found that the plea regarding non service/non issuance of notice u/s 143(2) goes to the root of the assessment and is a legal plea which may be raised before the Tribunal even if not pressed before the lower appellate authority. In view of the mandatory nature of service of notice under section 143(2) and the factual contention of non service, the Tribunal admitted the additional grounds for adjudication. [Paras 11]

Admitted the additional grounds raised by the assessee.

Service of notice under section 143(2) of the Income tax Act - validity of assessment framed under section 143(3) read with section 147 - distinction between issue of notice and proof of service under section 292BB - mandatory time limit/proviso to section 143(2) - Whether the reassessment under section 143(3) r.w.s. 147 is vitiated for want of issuance/service of notice under section 143(2) within the prescribed time. - HELD THAT: - On the material on record the Tribunal found no evidence that a notice under section 143(2) had been issued or dispatched to the assessee within the time limit prescribed by the proviso to section 143(2). Entries in the order sheet and the assessment order record only a notice under section 142(1) dated after the prescribed period. Reliance was placed on authoritative decisions and precedents holding that issuance and service of notice under section 143(2) within the prescribed period is mandatory for validity of reassessment proceedings initiated by a notice under section 148, and that section 292BB only relieves the department from proof of service but does not cure non issue of the requisite notice within the time limit. Applying these principles to the facts, the Tribunal held that absence of issuance/service of the section 143(2) notice rendered the assessment under section 143(3) r.w.s. 147 void ab initio. [Paras 15]

Annulled the assessment framed under section 143(3) r.w.s. 147 for Assessment Year 2005-06 as void ab initio.

Final Conclusion: The Tribunal allowed the consolidated appeals, held that no valid notice under section 143(2) was issued/served within the prescribed period and accordingly annulled the reassessments completed under section 143(3) read with section 147 for Assessment Year 2005-06.

Reopening of assessment after four years barred unless income escaped due to failure to disclose fully and truly all material facts - Jurisdictional requirement for issuance of notice under section 148 - Information from investigation wing alone is insufficient to confer jurisdiction for reopening without specific allegation of non disclosure

Reopening of assessment after four years barred unless income escaped due to failure to disclose fully and truly all material facts - Information from investigation wing alone is insufficient to confer jurisdiction for reopening without specific allegation of non disclosure - Validity of notice under section 148 and reopening of assessment framed for assessment year 2001-02 - HELD THAT: - The assessment for the year was completed after scrutiny and later a notice under section 148 was issued beyond four years from the end of the relevant assessment year. The first proviso to section 147 requires, where action is taken after the four year period, that any escapement of income must be by reason of the assessee's failure to make a return or to disclose fully and truly all material facts necessary for assessment. The reasons recorded for reopening relied on information received from the Director (Investigation) alleging receipt and provision of accommodation entries, but did not record any allegation or finding that the assessee had failed to disclose material facts during the original assessment. Prior decisions of higher fora establish that mere belief in escapement, without an express linkage to non disclosure by the assessee, does not satisfy the proviso and renders action under section 147/148 beyond four years without jurisdiction. Applying this principle to the facts, where books were produced and test checked during scrutiny and the reasons lack any whisper of non disclosure, the notice under section 148 is without jurisdiction and must be set aside. [Paras 6, 7, 11, 13]

Notice issued under section 148 is without jurisdiction; the reopening is set aside and the resultant assessment order is quashed.

Final Conclusion: The appeal is allowed; the notice under section 148 is set aside and the assessment order for assessment year 2001-02 is quashed.

Allowability of business expenditure - relevance and genuineness of vouchers and bills - treatment of operation and maintenance expenditure under a concession agreement - capital versus revenue nature of expenditure - burden of proof on revenue to substantiate disallowance

Allowability of business expenditure - relevance and genuineness of vouchers and bills - Whether the disallowance of travel and legal & professional expenses claimed by the assessee was justified. - HELD THAT: - The Tribunal examined the vouchers and invoices produced by the assessee and the findings of the CIT(A). The Assessing Officer had disallowed the expenditure on the basis that the assessee's authorised representative allegedly did not appear at voucher verification and that the expenditures may not relate to business. The CIT(A) found the vouchers to be self-explanatory and noted presence of the company's accountant at verification; no tangible or specific evidence was produced by the AO to substantiate the disallowance. On review, the Tribunal observed that the travel expenses were domestic (air and train) and incurred for business purposes including entertainment of visitors and staff travel, and that legal and professional fees, including retainer fees, were incurred in the course of securing bank guarantees and obtaining necessary legal assistance for the business. Given the documentary proof and absence of contrary tangible evidence from the AO, the Tribunal upheld the CIT(A)'s deletion of the disallowance. [Paras 10]

Disallowance of travel and legal & professional expenses amounting to the claimed sum deleted; revenue's ground dismissed.

Treatment of operation and maintenance expenditure under a concession agreement - capital versus revenue nature of expenditure - burden of proof on revenue to substantiate disallowance - Whether the maintenance expenditure claimed by the assessee should be treated as capital expenditure or as revenue expenditure deductible in the year incurred. - HELD THAT: - The assessee operated a road project under a concession agreement which expressly imposed operation and maintenance obligations. The AO treated large recurring maintenance/overlay works as capital on the ground of their quantum, without providing tangible evidence to show that the work resulted in enduring benefit beyond the concession obligations. The CIT(A) held, and the Tribunal agreed, that the nature of expenditure is determined by the character of the work and contractual obligation, not merely by its magnitude, and noted that the department had historically accepted such maintenance items as revenue expenditure. The Tribunal accepted the concession agreement clause obliging periodic maintenance/relaying and the assessee's consistent treatment and supporting P&L entries, and found no basis for recharacterisation to capital by the AO. [Paras 10]

Disallowance treating maintenance expenditure as capital set aside; maintenance expenditure held to be revenue in nature and deletion of addition upheld.

Final Conclusion: The Revenue's appeal is dismissed: the Tribunal upheld the CIT(A)'s deletions of the additions relating to travel and legal/professional expenses and the recharacterisation of routine maintenance expenditure as capital, holding the expenditures to be business related and revenue in nature for AY 2013-14.

Burden of proof under Section 123 of the Customs Act - admissibility and weight of confessional statement under Section 108 of the Customs Act - proof of licit possession of notified goods (gold) - corroboration by circumstantial evidence

Proof of licit possession of notified goods (gold) - belated production of invoices - Whether the Commissioner (Appeals) and the CESTAT were correct in accepting the respondent's contention of licit purchase based on invoices produced at the appellate stage. - HELD THAT: - The Court held that the invoices relied upon by the respondent were produced belatedly only at the stage of appeal and no explanation was offered for their absence during investigation and adjudication. The Commissioner (Appeals) was criticised for relying on prior judicial pronouncements instead of dispassionately appraising the facts; the belated explanation that the gold was sold to the respondent in India and was to be delivered to an undisclosed person in Mumbai was found to be facile and unpersuasive. Given the totality of facts, including the timing of production of documents, the Court concluded that the respondent had not discharged the onus of proving licit acquisition by relying on those invoices. [Paras 20, 21, 24, 25, 26]

The appellate authorities erred in accepting the belatedly produced invoices as sufficient proof of licit possession; the respondent failed to discharge the burden to prove licit acquisition.

Burden of proof under Section 123 of the Customs Act - notified goods (gold) - Whether the burden to prove that the seized gold was not smuggled lay on the respondent and whether he discharged that burden. - HELD THAT: - Gold being a notified item attracts the special burden under Section 123. The Court recalled that where goods to which Section 123 applies are seized from a person's possession, the burden to prove they are not smuggled lies on that person. The respondent had admittedly arrived from Dubai on the day of seizure and the gold was seized from his possession the same day. Applying common-sense appraisal of these facts and the statutory burden, the Court found that the respondent did not satisfactorily explain possession and therefore failed to discharge the burden cast on him by Section 123. [Paras 15, 16, 25, 32, 33]

Burden under Section 123 was on the respondent and he failed to discharge it; the seized gold must be regarded as smuggled.

Admissibility and weight of confessional statement under Section 108 of the Customs Act - corroboration by circumstantial evidence - Whether the un-retracted confession recorded under Section 108, together with circumstantial facts, sufficed to establish smuggling. - HELD THAT: - The respondent's statement under Section 108, wherein he admitted smuggling the gold from Dubai, was admissible and remained un-retracted; there was no evidence it was recorded under coercion. The Court held that the surrounding circumstances - travel from Dubai on the day of seizure, seizure from his possession at the railway station, the quantity of gold, absence of disclosure of purchaser or recipient during investigation and adjudication, and belated documentary claims - cumulatively corroborated the confessional statement. By applying a commonsense appraisal and following precedent that appearance and conduct may indicate smuggling where Section 123 applies, the Court accepted the confession and relevant circumstantial indicators as establishing smuggling. [Paras 18, 19, 27, 30, 31]

The un-retracted confession under Section 108, when considered with the circumstantial facts, sufficed to establish that the seized gold was smuggled by the respondent.

Final Conclusion: The appeal is allowed. The Court answered the substantial questions of law in favour of the Revenue, holding that (i) the burden under Section 123 to prove licit possession of the notified goods lay on the respondent and was not discharged, (ii) the belated production of invoices did not establish licit acquisition, and (iii) the un-retracted confession under Section 108 together with attendant circumstances established smuggling; the appellate orders in favour of the respondent are set aside.

Provisional release under Section 110(a) of the Customs Act, 1962 - detention and seizure of goods - detention certificate - production of panchnama - defreezing of bank account on issuance of NOC

Defreezing of bank account on issuance of NOC - Respondents have issued an NOC for defreezing the petitioner's bank account and communicated the same to the bank. - HELD THAT: - The Court records that an NOC has been issued by the respondents (DRI, Indore) for defreezing the petitioner's bank account and that a communication to the Branch Manager, ICICI Bank dated 23 August 2019 has been placed on record and furnished to the petitioner's counsel. On this footing the grievance concerning freezing of the bank account has been addressed by the respondents and noted by the Court. [Paras 2, 3]

The petitioner's grievance regarding the frozen bank account is disposed of in view of the NOC and communication produced by the respondents.

Production of panchnama - A panchnama of examination dated 1 July 2019 has been produced and furnished to the petitioner. - HELD THAT: - The respondents tendered a copy of the panchnama dated 1 July 2019, which the Court has taken on record and directed to be given to the petitioner's counsel. The panchnama bears the signature of the petitioner's CHA, which the Court records in relation to the petitioner's complaint about non-availability of the panchnama. [Paras 5, 6]

The petitioner's claim of non-availability of the panchnama is answered by the production of the panchnama.

Detention and seizure of goods - The goods covered by the shipping bills have been seized by the respondents by a seizure memo dated 31 August 2019. - HELD THAT: - The respondents tendered a copy of the seizure memo dated 31 August 2019, which the Court has taken on record and furnished to the petitioner's counsel. The Court notes the seizure as the operative step taken by the respondents in respect of the goods in question. [Paras 7]

The Court records that the goods stand seized pursuant to the seizure memo produced by the respondents.

Provisional release under Section 110(a) of the Customs Act, 1962 - The petitioner must apply for provisional release of the seized goods under Section 110(a) of the Customs Act, 1962; the respondents are directed to decide such application promptly. - HELD THAT: - The Court indicates that the appropriate course for the petitioner is to move an application for provisional release under Section 110(a) of the Customs Act, 1962. The Court directs that any such application, when filed, shall be decided by the respondents as early as possible and practicable and, preferably, within three weeks from receipt of a copy of the application. This is an administrative direction to the respondents to consider the statutory remedy of provisional release without prescribing any substantive outcome. [Paras 8, 9]

Application for provisional release under Section 110(a) to be filed by the petitioner and decided by the respondents preferably within three weeks.

Detention certificate - An application for a detention certificate in respect of the shipping bills, if filed, shall be considered by the respondents in accordance with law. - HELD THAT: - The Court records that any application by the petitioner for a detention certificate against the specified shipping bills will be considered by the respondents in accordance with law. The direction does not prejudge the merits; it mandates lawful consideration of such an application by the appropriate authority. [Paras 10]

Application for a detention certificate to be considered by the respondents in accordance with law.

Final Conclusion: The petition is disposed of: the respondents have produced an NOC for defreezing the bank account and the panchnama and seizure memo have been placed on record; the petitioner is directed to seek provisional release under Section 110(a) of the Customs Act, 1962 and any such application shall be decided promptly (preferably within three weeks), and any application for a detention certificate will be considered in accordance with law.

Cancellation of Letter of Permission under the Foreign Trade (Development and Regulation) Act, 1992 - non-implementation of Export Oriented Unit project - deemed export status of supplies - penalty for non-filing of Annual Progress Report - concurrent findings of fact and scope of judicial interference on writ

Cancellation of Letter of Permission under the Foreign Trade (Development and Regulation) Act, 1992 - non-implementation of Export Oriented Unit project - deemed export status of supplies - penalty for non-filing of Annual Progress Report - concurrent findings of fact and scope of judicial interference on writ - Validity of cancellation of the Letter of Permission, imposition of penalty, and the correctness of concurrent factual findings upheld by the writ court. - HELD THAT: - The Authority issued a Letter of Permission to the petitioner as a 100% Export Oriented Unit subject to commencement of commercial production within prescribed time and other conditions. The petitioner had not commenced commercial production within the period stipulated in the Letter of Permission and was issued a show cause notice. The Original Authority found that supplies effected did not amount to deemed export, that conditions of the Letter of Permission were not fulfilled, cancelled the Letter of Permission and imposed penalties including for non-filing of APR. The Appellate Authority confirmed that order. On judicial review the Single Judge examined the material and recorded that the petitioner failed to comply with the obligations under the Letter of Permission; there was no material to overturn the concurrent findings of fact recorded by the authorities, and no error or perversity was shown in their reasoning. The High Court, on intra-court appeal, found no ground to interfere with the Single Judge's conclusion that cancellation and penalties were just and proper in the facts and circumstances and dismissed the appeal. [Paras 6, 7, 8]

Concurrent factual findings that the Letter of Permission was not implemented, that supplies were not deemed exports, and that cancellation and penalties were justified are affirmed; the intra-court appeal is dismissed.

Final Conclusion: The High Court dismissed the intra-court appeal, upholding the cancellation of the Letter of Permission and the penalties imposed, finding no merit to disturb the concurrent findings of the original and appellate authorities.

Distinction between ores and concentrates by virtue of Chapter Note 4 deeming conversion to concentrate as manufacture - mis-declaration - confiscation under Section 111(d) and (m) - redemption fine in lieu of confiscation - recovery of duties under proviso to Section 28(1) and limitation as one year from the relevant date - interest under Section 28AA - penalty under Section 112(a) - strict construction of exemption notifications

Distinction between ores and concentrates by virtue of Chapter Note 4 deeming conversion to concentrate as manufacture - strict construction of exemption notifications - mis-declaration - Imported material is molybdenum concentrate not molybdenum ore; exemption under Notification No.4/2006-CE does not apply. - HELD THAT: - The Tribunal applied the ratio of the Apex Court in Star Industries to hold that insertion of Chapter Note 4 treats the process of converting ores into concentrates as 'manufacture', thereby rendering concentrate a different product from ore for duty and exemption purposes. As a consequence, an exemption notification which exempts only 'ores' cannot be read to include 'concentrates' and exemption claims must be strictly construed. On the facts the goods were found to be concentrates (having undergone roasting) though declared as ores, and therefore the claimed exemption was not admissible. [Paras 4]

Claimed exemption rejected; goods held to be concentrates and outside the exemption.

Recovery of duties under proviso to Section 28(1) and limitation as one year from the relevant date - interest under Section 28AA - Show cause notice issued within one year from the relevant date was within limitation; differential duty and interest demands are maintainable. - HELD THAT: - The Tribunal held that the amended Section 28 (as effected by Finance Act 2011) prescribes the normal limitation period of one year from the relevant date for issuing demand notices. The show cause notice dated 12.03.2012 in respect of Bills of Entry filed between 22.03.2011 and 18.09.2011 was within the normal period and hence the demands for differential customs duty and interest under Section 28AA are not barred by limitation. Consequently, the demand of differential duty and interest was upheld. [Paras 4]

Demand for differential customs duty and interest sustained as within limitation and otherwise justified.

Confiscation under Section 111(d) and (m) - redemption fine in lieu of confiscation - Goods were liable for confiscation for mis-declaration but were not confiscated because they were not available; no redemption fine was imposed. - HELD THAT: - The Tribunal recorded the Commissioner's finding that the imports were mis-declared as ores when they were concentrates, rendering them liable to confiscation under Section 111(m). However, since the goods were not available for confiscation, no confiscation or redemption fine was imposed and the Tribunal did not further examine redemption in view of non-availability. [Paras 1, 4]

Liability to confiscation affirmed but no confiscation or redemption fine imposed due to non-availability of goods.

Penalty under Section 112(a) - mis-declaration - Penalty under Section 112(a) imposed on the assessee is sustained. - HELD THAT: - Having upheld that the goods were mis-declared as ores instead of concentrates and that differential duty and interest are payable, the Tribunal affirmed the Commissioner's imposition of penalty under Section 112(a) on the assessee. The Tribunal found the penalty neither excessive nor unjustified in the circumstances of mis-declaration and attendant duty shortfall. [Paras 4]

Penalty under Section 112(a) upheld.

Final Conclusion: Appeal dismissed and cross objections disposed of; exemption claim rejected, differential duty and interest sustained as within limitation, liability to confiscation affirmed though not enforced for non-availability, and penalty under Section 112(a) upheld.

Transfer of pending winding up proceedings to the NCLT under Section 434 - mandatory transfer under Rule 5 for petitions not served under Rule 26 - discretionary power of Company Court to transfer winding up petitions - overriding effect of the Insolvency and Bankruptcy Code under Section 238 - recall/revocation of winding up order and inherent powers of the Company Court - priority of secured creditor's choice of remedy and rights under SARFAESI

Transfer of pending winding up proceedings to the NCLT under Section 434 - mandatory transfer under Rule 5 for petitions not served under Rule 26 - discretionary power of Company Court to transfer winding up petitions - Whether the Company Court may transfer a pending winding up petition to the NCLT and the scope of its discretion under Section 434 read with Rule 5. - HELD THAT: - A conjoint reading of Section 434(1)(c) and Rule 5 shows two strands: (i) where Rule 5 conditions are satisfied (petition not served under Rule 26), transfer to the Tribunal is mandatory; and (ii) the fifth proviso to Section 434(1)(c) contemplates that any party to winding up proceedings may apply for transfer and the Court 'may' transfer such proceedings. Thus the jurisdiction to transfer is not confined to the Rule 5 mandatory category but extends, in the Court's discretion, to other winding up petitions where an application is moved. The statutory scheme and the objects of the IBC favour transfer where transfer would advance resolution/revival and avoid parallel, conflicting proceedings; the Company Court's discretion must therefore be exercised having regard to the interests of creditors and stakeholders and the special character of the IBC. [Paras 29, 30, 31, 34, 36]

The Company Judge acted within jurisdiction in transferring the winding up petition to the NCLT; transfer is mandatory in Rule 5 cases and otherwise rests in the Court's discretion under Section 434.

Overriding effect of the Insolvency and Bankruptcy Code under Section 238 - priority of revival/resolution scheme of IBC over Company Court winding up - Whether proceedings under the IBC prevail over winding up proceedings in the Company Court and justify transfer. - HELD THAT: - IBC is a special, later enactment with a non-obstante clause in Section 238 that gives its provisions overriding effect where inconsistency arises. The object of IBC is resolution and revival to maximize asset value for stakeholders; parallel proceedings in Company Courts and under IBC would frustrate that objective. Precedents and statutory amendments indicate that where transfer to NCLT aids the IBC's objectives, the Company Court should allow transfer, subject to the absence of clear legal impediment. [Paras 32, 33, 34, 36]

Proceedings under the IBC, by virtue of Section 238 and its object, can prevail and justify transfer of winding up petitions to the NCLT to enable CIRP and avoid parallel proceedings.

Recall/revocation of winding up order and inherent powers of the Company Court - Whether an order admitting a winding up petition and appointing the Official Liquidator is irrevocable so as to preclude transfer to NCLT, and whether the Company Court could recall that order. - HELD THAT: - A winding up order commences a process but does not automatically culminate in dissolution on the day it is passed. The Company Court retains inherent powers (Rule 9 of Company Court Rules) to give directions or recall orders for ends of justice. Precedents recognize that a winding up order can be revoked or recalled where appropriate. Here the Court found that the liquidation was at an initial stage and no irreversible steps had been taken by the Official Liquidator; accordingly the Company Judge was competent to recall the admission and appointment and transfer the petition. [Paras 37, 38, 39, 41]

The winding up order was not immutable; the Company Court could recall the order and revoke the appointment of the Official Liquidator where liquidation had not progressed to irreversible steps.

Priority of secured creditor's choice of remedy and rights under SARFAESI - Whether a secured creditor (SBI), impleaded in proceedings, could seek transfer of the winding up petition and whether the Official Liquidator may obstruct SARFAESI remedies or possession of mortgaged property. - HELD THAT: - The Court held that a secured creditor has a substantial stake and locus to seek transfer; SBI's impleadment was impliedly allowed and its position as secured creditor entitled it to move for transfer. Further, once transferred to NCLT the creditor's independent proceedings under IBC would continue, and parallel continuance of liquidation before the OL would be incongruous. The Court also directed that the Official Liquidator must not obstruct statutory remedies under SARFAESI: the Receiver appointed under SARFAESI is entitled to possession and the OL was directed to deseal and deliver possession of the mortgaged asset. [Paras 40, 41, 42, 45]

The secured creditor could seek transfer; the Company Court rightly allowed impleadment and transfer, and the Official Liquidator was directed to deseal and deliver the mortgaged asset to the SARFAESI Receiver.

Final Conclusion: The impugned order transferring the winding up petition to the NCLT was upheld: transfer is mandatory in Rule 5 cases and otherwise lies in the Company Court's discretion under Section 434, the IBC's object and overriding effect support transfer to enable CIRP, winding up orders may be recalled where liquidation is not irreversible, and the Official Liquidator must not obstruct the secured creditor's SARFAESI remedies (the mortgaged asset to be desealed and delivered to the Receiver).

Maintainability of execution proceedings - Director Identification Number (DIN) requirement - Disqualification under Section 164(1)(h) - Vacation of office under Section 167 - Validity of board resolution - Effect of dissolution on right to recover - Finality of earlier order on computation of decretal amount

Maintainability of execution proceedings - Director Identification Number (DIN) requirement - Disqualification under Section 164(1)(h) - Vacation of office under Section 167 - Validity of board resolution - Execution application filed on behalf of M/s H.S. Tuli & Sons Builders Pvt. Ltd. was not maintainable because the directors, including the purported Managing Director, did not possess DIN and therefore were disqualified and had vacated office. - HELD THAT: - The Court found that every director appointed before or after the statutory amendments must have a Director Identification Number (DIN) and that non-possession of DIN attracts disqualification under Section 164(1)(h) read with Section 152(3) and exposes the office to vacation under Section 167. A Board of Directors composed of persons who have incurred such disqualifications cannot constitute a valid Board; consequently a resolution passed by such a Board is void and proceedings instituted pursuant to such a resolution are a nullity. Although the petitioner withdrew the objection based on an asserted typographical error in the copy of the resolution after inspection of the original, the separate and independent objection that none of the directors possessed DIN was argued in written submissions taken on record by the Executing Court and required determination. In view of the statutory scheme and the factual concession that DINs were not possessed, the Court held the Board that passed the resolution dated 03.03.2016 was not valid and that Sh. Harkrishen Singh Tuli could not lawfully act as Managing Director for purposes of prosecuting the execution proceedings. [Paras 21, 22, 23, 24, 26]

Objections by the Union of India on maintainability grounds are accepted insofar as the execution application was filed pursuant to a resolution of a Board whose members had incurred disqualification for non-possession of DIN; the execution application is non-maintainable and the orders under challenge are set aside.

Finality of earlier order on computation of decretal amount - Objection that the Executing Court's computation (interest-on-interest by clubbing awarded amount and pre-decree interest) was incorrect was not determined afresh because that computation had been upheld by an earlier order which attained finality. - HELD THAT: - The Court noted that the Civil Judge (Junior Division) had earlier decided the mode of computation in favour of the decree-holder and that that order dated 04.10.2006 was not challenged by the petitioner and had attained finality. An affidavit filed on behalf of the petitioner admitted absence of challenge to that order. Given the acceptance of the objections on maintainability grounds and the finality of the 2006 computation order, the Court refrained from re examining the computation issue. [Paras 25]

No fresh finding on the correctness of the Executing Court's calculations is required; the earlier computation order has attained finality and the objection is not entertained.

Final Conclusion: Objections of the Union of India are partly accepted: the execution application filed on behalf of M/s H.S. Tuli & Sons Builders Pvt. Ltd. is held to be non-maintainable for want of DIN among its directors and the orders dated 13.10.2018 and 05.11.2018 are set aside; subject to this, the decree-holder remains at liberty to recover the amount due in accordance with law.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - provisional attachment under the Prevention of Money Laundering Act, 2002 - definition of proceeds of crime under PMLA - priority of secured creditors over other claims - overriding effect of the Insolvency and Bankruptcy Code - jurisdiction of the National Company Law Tribunal under Section 60(5) of the IBC

Definition of proceeds of crime under PMLA - provisional attachment under the Prevention of Money Laundering Act, 2002 - Whether the Provisional Attachment Order attached properties of the corporate debtor that were acquired with proceeds of crime and thus validly attachable under PMLA - HELD THAT: - The Tribunal found on the material before it that the immovable properties provisionally attached were acquired by the corporate debtor long prior to the events said to give rise to the proceeds of crime (the alleged transfers through Mahal Hotels during 2011-2013), and that those properties were mortgaged to banks in 2008-2009. The Tribunal accepted the principle, drawn from PMLA jurisprudence and the Andhra Pradesh High Court decision cited, that where a property was bona fide acquired prior to the scheduled offence and there is no material demonstrating that the proceeds of crime were used to acquire that property, the property cannot be treated as proceeds of crime and cannot be sustained under a provisional attachment. The Enforcement Directorate did not establish that the attached properties were acquired with the tainted funds or that they were equivalent property situated abroad; therefore the prerequisite nexus between the alleged proceeds and the attached assets was absent and the provisional attachment could not be maintained. [Paras 12, 16, 17, 22, 63]

Provisional Attachment Order is unsustainable as the attached properties were not shown to be acquired with proceeds of crime and the attachment is to be raised.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - provisional attachment under the Prevention of Money Laundering Act, 2002 - overriding effect of the Insolvency and Bankruptcy Code - Whether attachment proceedings under PMLA could validly continue in relation to assets of a corporate debtor subject to CIRP and moratorium under Section 14 of IBC - HELD THAT: - The Tribunal considered the effect of the moratorium and the commercial reality that the attached assets were secured assets forming part of a corporate insolvency resolution process with a resolution plan approved by the Committee of Creditors and pending tribunal approval. Relying on the IBC framework and authorities emphasizing NCLT's singular jurisdiction in insolvency matters, the Tribunal held that allowing provisional attachment to stand in respect of assets which have no demonstrated nexus to proceeds of crime would undermine the CIRP and the rights of secured creditors. The Tribunal noted precedents and statutory provisions protecting secured creditors' priority and observed that an attachment which frustrates the resolution process cannot be permitted in the absence of the requisite evidential nexus. Accordingly, the attachment made while moratorium and CIRP were subsisting was not to be sustained in the circumstances of this case. [Paras 11, 18, 21, 22, 62]

The provisional attachment cannot stand during the CIRP/moratorium in respect of the attached properties in the present facts and is to be raised.

Jurisdiction of the National Company Law Tribunal under Section 60(5) of the IBC - priority of secured creditors over other claims - Whether the NCLT has jurisdiction to entertain the application under Section 60(5) of the IBC to set aside the provisional attachment and to adjudicate competing claims affecting assets of the corporate debtor - HELD THAT: - The Tribunal observed that Section 60(5) vests the NCLT with jurisdiction to entertain applications by or against the corporate debtor, and to decide questions of priorities or questions of law or fact arising out of insolvency resolution or liquidation proceedings. The Tribunal relied on apex-court authority establishing NCLT's exclusive jurisdiction in such matters and concluded that it was the proper forum to examine the effect of the attachment on the CIRP, the rights of secured creditors and the resolution plan. On that basis the Tribunal exercised its jurisdiction under Section 60(5) to determine and set aside the provisional attachment in the circumstances before it. [Paras 61, 62, 63]

NCLT has jurisdiction under Section 60(5) IBC to decide the application and accordingly has set aside the provisional attachment.

Final Conclusion: Both applications are allowed: the National Company Law Tribunal, exercising jurisdiction under Section 60(5) of the IBC, held that the Provisional Attachment Order dated 26.03.2019 could not be sustained because the attached properties were acquired prior to the alleged proceeds of crime, were mortgaged to banks before the alleged offences, and there was no material to show they were purchased with tainted funds; accordingly the provisional attachment is raised.

Condonation of delay - appeal to Adjudicating Authority under Section 42 of the I&B Code, 2016 - time-barred claim - limitation and laches - liquidator's rejection of claim - acknowledgement of debt in financial statements - insufficiency of assets in liquidation

Condonation of delay - appeal to Adjudicating Authority under Section 42 of the I&B Code, 2016 - Whether the delay of 175 days in filing the appeal against the liquidator's rejection of the claim is liable to be condoned - HELD THAT: - Section 42 of the I&B Code, 2016 prescribes that a creditor may appeal to the Adjudicating Authority against the liquidator's decision within 14 days of receipt of the decision. The Tribunal treated the 14-day period as mandatory for filing the appeal and found that the applicant's delay of 175 days could not be condoned. The medical and age related ailments relied upon by the applicant were not supported by documentary evidence such as medical certificates and were thus insufficient to explain or justify the prolonged delay. The Tribunal also noted the applicant's long inaction since 03.09.2013 and characterised the belated move to appeal as inordinate delay and laches. [Paras 5, 9, 10, 11]

The application for condonation of delay is rejected and the delay of 175 days in filing the appeal is not condoned.

Time-barred claim - limitation and laches - liquidator's rejection of claim - acknowledgement of debt in financial statements - insufficiency of assets in liquidation - Whether the applicant's claim for consultancy charges, filed before the liquidator on 04.07.2018, was correctly rejected as barred by limitation and whether any payment could be made even if admitted - HELD THAT: - The liquidator relied on the corporate debtor's records and the applicant's last demand dated 03.09.2013 to conclude that the claim filed on 04.07.2018 was time barred. The applicant relied on an entry in the financial statements (Note No.5(c) for year ending 31.03.2017) showing other payables including his claim and contended that this amounted to an acknowledgement of debt bringing the claim within limitation. The Tribunal found that the applicant had slept over the claim from 03.09.2013 and only filed before the liquidator on 04.07.2018, attracting delay and laches. The Tribunal also noted that the liquidator stated that negligible assets remained and most assets were encumbered in favour of secured creditors who had opted out, so that even if the claim were admitted there was no corpus available to satisfy it. [Paras 6, 7, 8, 10, 11]

The liquidator's rejection of the claim as time barred is upheld and the claim is dismissed; additionally, no payment can be made in view of insufficiency and encumbrance of assets.

Final Conclusion: The applications for condonation of delay and the appeal against the liquidator's rejection of the claim are dismissed; the 175 day delay is not condoned and the time barred claim is rejected, with no funds available in the liquidation estate to satisfy the claim.

Voluntary liquidation under the Insolvency and Bankruptcy Code, 2016 - compliance with the requirements of Section 59 of the Code - dissolution of a corporate person on completion of voluntary liquidation - distribution of liquidation proceeds in accordance with the priority of payments under the Code - preservation of liquidation records as required by the Voluntary Liquidation Process Regulations

Voluntary liquidation under the Insolvency and Bankruptcy Code, 2016 - compliance with the requirements of Section 59 of the Code - dissolution of a corporate person on completion of voluntary liquidation - Whether the liquidator has complied with the statutory requirements for voluntary liquidation and whether the Tribunal should order dissolution of the company - HELD THAT: - The Tribunal examined the petition, annexures and the liquidator's affidavit recording that the shareholders passed the special resolution for voluntary liquidation, the declaration of no debts, appointment of an eligible liquidator, publication of the public announcement, submission of the preliminary and final reports, audited final accounts and that no claims were received. The Adjudicating Authority found that the liquidator had complied with the provisions of Section 59 of the Insolvency and Bankruptcy Code, 2016 and with the Insolvency and Bankruptcy Board of India (Voluntary Liquidation Process) Regulations, 2017 as represented in the materials before it. On that basis and by exercising the power under the Code, the Tribunal held that the voluntary liquidation process was complete and ordered dissolution of the company with effect from the date specified in the order. [Paras 4, 5]

Petitioner company dissolved on completion of voluntary liquidation; CP No.114/BB/2019 allowed and company dissolved with effect from 28.06.2019.

Preservation of liquidation records as required by the Voluntary Liquidation Process Regulations - obligations of the liquidator on completion of liquidation - Duties to be performed by the liquidator following dissolution, including preservation of records and transmission of the order and affidavit to statutory authorities - HELD THAT: - The liquidator declared his intention to preserve the reports, registers and books of account in physical or electronic form in compliance with the Regulations. The Tribunal, after concluding compliance with the Code and Regulations, directed the liquidator to forward a copy of the dissolution order together with the liquidator's affidavit of compliance to the Registrar of Companies, Karnataka, the Insolvency and Bankruptcy Board of India and other concerned statutory authorities within fourteen days. The direction implements post-dissolution obligations to notify and provide proof of compliance to statutory bodies. [Paras 4, 6]

Liquidator directed to forward the order and affidavit of compliance to ROC, IBBI and concerned authorities within 14 days; liquidator to preserve liquidation records as required by the Regulations.

Dissolution of a corporate person on completion of voluntary liquidation - scope of adjudicatory order and non-preclusion of other statutory action - Whether the Tribunal's dissolution order bars other statutory authorities from taking action for past violations - HELD THAT: - The Tribunal expressly confined its order to the voluntary liquidation of the petitioner company and clarified that the dissolution order does not prevent the Registrar of Companies or any other statutory authority from initiating or proceeding with appropriate actions in accordance with law for any violations or offences committed prior to or during the liquidation process. This qualification limits the effect of the dissolution to the liquidation process only and preserves statutory remedies and enforcement by other authorities. [Paras 7]

Order confined to voluntary liquidation; does not preclude Registrar of Companies or other statutory authorities from taking lawful action for prior or during-liquidation violations.

Final Conclusion: The Adjudicating Authority found that the liquidator complied with the statutory requirements for voluntary liquidation and, exercising its powers, dissolved M/s Bhoovahana Technologies Private Limited effective 28.06.2019; the liquidator was directed to forward the order and affidavit of compliance to ROC, IBBI and relevant authorities within 14 days, and the dissolution order was expressly confined to the liquidation without prejudicing other statutory actions for past violations.

Default and financial debt - admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - completeness of application under the Rules and Form I - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Default and financial debt - admission of petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 - completeness of application under the Rules and Form I - The Section 7 petition by the financial creditor is maintainable and complete and the corporate debtor committed a default attracting admission under the Code. - HELD THAT: - The Tribunal examined the loan sanction, security documents, disbursement and repayment schedule and considered the accounts and supporting documents placed on record. The Authority found that the corporate debtor failed to repay instalments and that the amount claimed constitutes a financial debt; material on record establishes both 'debt' and 'default'. The application was filed in the prescribed form and the prescribed fee paid. No bar of limitation was found on the claim. In view of these findings, the petition satisfies the requirements of Section 7 and the tests set out for admission (existence of default, completeness of application and status of proposed IRP). [Paras 12, 13, 14, 16, 17]

The petition under Section 7 is admitted.

Appointment of Interim Resolution Professional - The proposed Insolvency Resolution Professional recommended by the applicant is not appointed and the applicant is directed to propose an alternative. - HELD THAT: - Although the applicant proposed a Resolution Professional, the Adjudicating Authority recorded reservations about appointing the proposed person in view of his past conduct in another matter. The Authority noted that no disciplinary proceedings are pending against the proposed IRP, but nonetheless declined to appoint him and directed the financial creditor to suggest another professional by affidavit within one week. The moratorium's temporal operation was linked to receipt of the required affidavit in this context. [Paras 13, 15]

Applicant to file an affidavit suggesting an alternative IRP within one week; the proposed IRP is not appointed.

Moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - A moratorium is declared in terms of Section 14, with specified prohibitions and effectivity as stated in the order. - HELD THAT: - Upon admission of the petition, the Tribunal declared the moratorium prohibiting institution or continuation of suits or proceedings against the corporate debtor, transfer or encumbrance of its assets, actions to enforce security interests (including under the SARFAESI Act), and recovery of property by owners/lessors in possession. The Tribunal further directed that supply of goods and essential services should not be terminated during the moratorium except as may be notified by the Central Government. The order specified the temporal scope of the moratorium as commencing from the operative date indicated in the order and continuing until completion of the corporate insolvency resolution process or until approval of a resolution plan or order for liquidation, as applicable. [Paras 18, 19, 20]

Moratorium declared in the terms set out by the Tribunal, operative from the date specified in the order and continuing until completion of the CIRP or earlier orders approving a resolution plan or directing liquidation.

Final Conclusion: The petition under Section 7 is admitted on findings of financial debt and default; moratorium under Section 14 is declared as directed; the proposed IRP is not appointed and the financial creditor must propose an alternate IRP by affidavit within one week; order to be communicated to the parties.

Limitation - assignment of debt and liability of corporate debtor - admission under Section 7 of I&B Code and initiation of Corporate Insolvency Resolution Process - verification and collation of claims by the Resolution Professional - exaggeration of claim

Limitation - Whether the Financial Creditor's Section 7 application was time-barred. - HELD THAT: - The Tribunal found that the plea of limitation was untenable in the face of contemporaneous documentary evidence and admissions. The record showed renewal of the secured debt, assignment of the account to the Financial Creditor, execution of a revival letter dated 20th February, 2016 and a balance confirmation dated 22nd February, 2016 by the Corporate Debtor, admission in the Corporate Debtor's own written submissions acknowledging a substantial balance as on 15th March, 2018, and a last payment made by the Corporate Debtor on 14th November, 2017. The assignment did not extinguish the debtor's liability. Having regard to these documents and admissions, the Tribunal concluded that the claim was within the period of limitation and upheld the Adjudicating Authority's rejection of the limitation plea. [Paras 6]

Plea of limitation repelled and the claim held to be within period of limitation.

Exaggeration of claim - assignment of debt and liability of corporate debtor - Whether the Financial Creditor's claim was grossly exaggerated and whether the consideration for assignment affected the Corporate Debtor's liability. - HELD THAT: - The Tribunal held that the allegation of gross exaggeration rested on conjecture without evidentiary basis. Even assuming the assignment consideration was less than the face debt, that fact would not dilute or discharge the Corporate Debtor's liability to pay the outstanding debt. Assignment merely changes the creditor and vests the assignee with authority to enforce the claim; it does not alter the debtor's obligation. Questions as to quantum or collated claims are matters for verification during the CIRP and by the Resolution Professional, not for rejection of admission under Section 7 at the preliminary stage. [Paras 7]

Challenge of gross exaggeration and reliance on assignment consideration rejected; assignment consideration irrelevant to debtor's liability at admission stage.

Admission under Section 7 of I&B Code and initiation of Corporate Insolvency Resolution Process - verification and collation of claims by the Resolution Professional - Whether the Adjudicating Authority erred in admitting the Section 7 application and initiating CIRP. - HELD THAT: - The Tribunal affirmed the Adjudicating Authority's order admitting the Section 7 application, observing that the statutory threshold for initiation of CIRP was satisfied (debt exceeding Rupees One Lakh and default). The Tribunal emphasised that detailed quantification, collation and verification of claims are appropriate for the Resolution Professional to undertake once the CIRP is underway; such matters do not preclude admission. The Tribunal found no legal infirmity in the order of admission. [Paras 8]

Impugned order of admission under Section 7 upheld and initiation of CIRP sustained; claims to be verified during CIRP.

Final Conclusion: Appeal dismissed. The Tribunal upheld the Adjudicating Authority's admission of the Financial Creditor's Section 7 application, rejecting the limitation defence and the challenge of gross exaggeration; quantification and verification of claims to be undertaken during the CIRP, and the Adjudicating Authority directed to address any grievance against the Resolution Professional.

Jurisdiction under Articles 226 and 227 of the Constitution of India - jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 - maintainability of appeal under Section 4 of the Karnataka High Court Act, 1961 - effect of Section 362 Cr.P.C. (functus officio and bar to alteration) - prayer for quashing of proceedings arising from registration of an ECIR

Jurisdiction under Articles 226 and 227 of the Constitution of India - jurisdiction under Section 482 of the Code of Criminal Procedure, 1973 - prayer for quashing of proceedings arising from registration of an ECIR - Whether the learned Single Judge, while passing the judgment and order dated 29th August 2019, exercised jurisdiction only under Articles 226 and 227 or also under Section 482 Cr.P.C. - HELD THAT: - The Court examined the writ petitions, the prayer clause pressed in the Single Judge (clause (e) seeking quashing of proceedings consequent to registration of an ECIR) and the Single Judge's own contemporaneous statements. The petitioners had invoked Articles 226 and 227 read with Section 482 Cr.P.C; the relief sought included quashing of proceedings founded on registration of an offence under the Prevention of Money Laundering Act, 2002, which is the sort of relief ordinarily sought under Section 482 Cr.P.C. The Single Judge's order itself records that he exercised jurisdiction under Section 482 Cr.P.C in addition to Articles 226 and 227. Given the combination of the invoked provisions, the nature of the relief sought (quashing of proceedings arising out of an ECIR) and the Single Judge's own recorded statement, the Court held that it was not open to disregard that contemporaneous recording and concluded that the Single Judge had exercised jurisdiction under Section 482 Cr.P.C as well as under Articles 226 and 227. [Paras 20, 21, 22, 23]

The learned Single Judge exercised jurisdiction under Section 482 Cr.P.C in addition to Articles 226 and 227 of the Constitution of India.

Effect of Section 362 Cr.P.C. (functus officio and bar to alteration) - continuation of interim relief - Whether Section 362 Cr.P.C. prevented the learned Single Judge from considering the petitioners' memo seeking continuation of interim relief after the order dated 29th August 2019. - HELD THAT: - The Court observed that Section 362 Cr.P.C. prohibits alteration of an order except for correction of clerical or arithmetical errors, but it does not preclude a court from considering a request to continue interim relief. Even assuming that the Single Judge had exercised jurisdiction under Section 482 Cr.P.C., Section 362 could not have been a bar to entertaining the limited prayer for continuation of interim relief. The Court held there was no justification for the Single Judge to refuse to consider the petitioners' request on the ground that he had become functus officio under Section 362. [Paras 11]

Section 362 Cr.P.C. did not preclude consideration of the petitioners' prayer for continuation of interim relief and could not lawfully have been invoked to refuse that prayer.

Maintainability of appeal under Section 4 of the Karnataka High Court Act, 1961 - exercise of concurrent jurisdiction under Article 226 and Section 482 Cr.P.C. - Whether the appeals filed under Section 4 of the High Court Act against the Single Judge's order dated 29th August 2019 are maintainable. - HELD THAT: - Section 4 of the High Court Act permits appeals from single Judge orders passed in exercise of the High Court's original jurisdiction under the Act or any law then in force. Where a Single Judge's order is made by exercising jurisdiction under Section 482 Cr.P.C., that order cannot be characterised as an exercise solely of the High Court's original writ jurisdiction for purposes of Section 4. The Court reasoned that when powers under Article 226 and Section 482 are invoked and the Single Judge is found to have exercised Section 482 jurisdiction, the exercise cannot be severed for purposes of maintaining an appeal under Section 4. Given its conclusion that the Single Judge did exercise Section 482 Cr.P.C. jurisdiction, the Court held that an appeal under Section 4 was not maintainable in respect of that order. [Paras 13, 20, 22]

The appeals under Section 4 of the High Court Act are not maintainable because the Single Judge's order was passed in exercise of jurisdiction under Section 482 Cr.P.C. in addition to Articles 226 and 227.

Final Conclusion: The appeals are dismissed. The Court held that the Single Judge had exercised jurisdiction under Section 482 Cr.P.C. along with Articles 226 and 227, Section 362 Cr.P.C. did not bar consideration of a prayer to continue interim relief, and consequently appeals under Section 4 of the High Court Act against the Single Judge's order dated 29th August 2019 were not maintainable.

CENVAT credit on input services - disclosure in ST3 returns - suppression of facts - extended period of limitation

Extended period of limitation - suppression of facts - disclosure in ST3 returns - Whether the demand for recovery of CENVAT credit could be sustained by invoking the extended period of limitation on the ground of suppression where the ST3 returns filed by the appellant disclosed the availment of the credit. - HELD THAT: - The original authority had allowed the CENVAT credit on the impugned services while the Commissioner (Appeals) reversed that view and held that the appellant had suppressed material facts and thus extended limitation could be invoked. The Tribunal found that the show-cause notice itself was issued after scrutiny of the ST3 returns filed by the appellant and that those returns disclosed the material facts relating to the availment of CENVAT credit. Given that there was disclosure in the statutory return and no factual suppression, the condition for invoking the extended period of limitation was not satisfied. The Tribunal applied the consistent ratio of earlier decisions holding that extended limitation is not invokable in the absence of suppression, and therefore the demand issued beyond the normal period was barred by limitation. The appeal was allowed on this ground without adjudicating the substantive merits of admissibility of the impugned credits. [Paras 6]

Demand for recovery of CENVAT credit confirmed by Commissioner (Appeals) set aside as barred by limitation; appeal allowed on limitation ground.

Final Conclusion: The appeal is allowed solely on the ground that the demand, having been raised after the normal limitation period and made on facts disclosed in the ST3 returns (there being no suppression), is barred by limitation; consequentially the recovery and penalty confirmed by the Commissioner (Appeals) are set aside without deciding the merits of the CENVAT credit issue.

Principles of natural justice - opportunity of personal hearing under Section 33A of the Central Excise Act, 1944 - failure to reply to a show cause notice and adverse inference - reply filed prior to issuance of show cause notice not substituting for a reply to the notice - liability under Rule 26 of the Central Excise Rules, 2002 - availability of statutory appeal remedy before the Appellate Tribunal

Principles of natural justice - opportunity of personal hearing under Section 33A of the Central Excise Act, 1944 - failure to reply to a show cause notice and adverse inference - Whether the impugned adjudication violated principles of natural justice by not affording the petitioner a personal hearing. - HELD THAT: - The Court found that the writ challenge was founded on alleged breach of natural justice but that the petitioner did not file any reply to the show cause notice. The Court applied the statutory scheme under Section 33A, holding that an opportunity of personal hearing is to be afforded when a party desires it and such request ordinarily emerges from a reply to the show cause notice. Failure to file a reply and not participate in adjudication permits an adverse inference and does not entitle the petitioner to insist upon personal hearing as of right. The Court therefore declined to hold that principles of natural justice were violated and treated the matter as one fit for appellate adjudication rather than for writ relief on that ground. [Paras 8, 9, 10]

No violation of principles of natural justice is found; absence of reply and failure to seek a hearing disentitle the petitioner to complain of lack of personal hearing.

Reply filed prior to issuance of show cause notice not substituting for a reply to the notice - Whether the petitioner's earlier reply dated 29.05.2014 could be treated as response to the later show cause notice. - HELD THAT: - The Court held that a reply filed before the show cause notice cannot be treated as a response to allegations subsequently made in the notice. Once the Adjudicating Authority issues a show cause notice containing specific allegations, the petitioner is required to file a suitable reply addressing those allegations; absent such a reply, the earlier communication does not absolve the petitioner of the duty to respond to the show cause notice and cannot be substituted for a fresh reply. [Paras 10]

The earlier reply does not operate as a reply to the subsequent show cause notice and could not excuse non-participation in the adjudication.

Availability of statutory appeal remedy before the Appellate Tribunal - Whether the writ petition should be entertained in view of the existence of an efficacious statutory appeal and the remedy to challenge the adjudication. - HELD THAT: - The Court observed that a statutory appeal remedy to the Customs, Central Excise and Service Tax Appellate Tribunal is available and that the present petition was being maintained primarily on the ground of alleged breach of natural justice. Having found no such breach, the Court declined to entertain the matter on merits and granted liberty to the petitioner to file a regular appeal within a limited time. The Court directed that any such appeal be considered on its own merits by the appellate forum without reference to limitation. [Paras 7, 11]

Writ petition disposed of by refusal of writ relief on the contested grounds and liberty granted to file statutory appeal; appellate forum to decide on merits and limitation.

Final Conclusion: Writ petition dismissed without adjudicating the merits of the penalty; no violation of natural justice found as the petitioner did not file a reply or seek a personal hearing; petitioner granted four weeks' liberty to file a statutory appeal which the Appellate Tribunal shall decide on merits and without regard to limitation.

Remand for fresh adjudication - setting aside of appellate tribunal order - restoration of appeals to tribunal - adjudication on merits - direction for expeditious disposal

Setting aside of appellate tribunal order - restoration of appeals to tribunal - absence of adjudication on merits - Whether the Tribunal's common Judgment and Order dated 30.11.2010 should be set aside and the Assessees' appeals restored to the Tribunal for fresh consideration on merits. - HELD THAT: - The High Court held that the issues in the present appeals were covered by its earlier common Judgment and Order dated 22.08.2019. The Tribunal had not finally adjudicated the matters on merits. For the reasons articulated in the Court's earlier decision, the common Tribunal order dated 30.11.2010 is set aside and the Assessees' appeals are restored to the Tribunal for fresh adjudication on their own merits. The Court expressly preserved the parties' contentions on merits for evaluation afresh by the Tribunal, indicating that the previous appellate order did not constitute a final merit determination.

The Tribunal's common order dated 30.11.2010 is set aside and the Assessees' appeals are restored to the Tribunal for fresh adjudication on merits.

Remand for fresh adjudication - direction for expeditious disposal - Tribunal's duty to issue notice and decide on merits - What directions should be given to the Tribunal upon restoration of the appeals. - HELD THAT: - The Court directed that the Tribunal, upon receipt of an authenticated copy of this Judgment, shall issue notices to the Assessees and proceed to dispose of the restored appeals on their merits and in accordance with law. The Tribunal was requested to dispose of the appeals expeditiously and, in any event, within six months from the date on which the parties file an authenticated copy of this Judgment. The Court left all substantive contentions open for the Tribunal's consideration and recorded no order as to costs.

The Tribunal is directed to issue notice and decide the restored appeals on merits expeditiously, and in any case within six months from filing of an authenticated copy of this Judgment.

Final Conclusion: The common Tribunal order dated 30.11.2010 is set aside; the Assessees' appeals are restored to the Tribunal for fresh adjudication on merits in accordance with the Court's earlier reasoning, with directions to issue notice and dispose of the matters expeditiously, within six months of filing an authenticated copy of this Judgment.

Reversal of cenvat credit on inputs on closure - Applicability of Rule 3(5) of Cenvat Credit Rules, 2004 - Use of SION (Standard Input Output Norms) for ascertaining input stocks - Reversal under Rule 11 of Cenvat Credit Rules, 2004 on final product becoming exempt - Refund of pre-deposits on successful appeal

Applicability of Rule 3(5) of Cenvat Credit Rules, 2004 - Reversal of cenvat credit on inputs on closure - Validity of show cause notice issued on the basis that Rule 3(5) CCR required reversal/receipt-invoice treatment for inputs on closure of the unit. - HELD THAT: - The Tribunal found as an admitted fact that no inputs were removed as such by the appellant. Rule 3(5) of the Cenvat Credit Rules applies to reversal where inputs are removed as such under cover of an invoice. Because there was no removal of inputs, the show cause notice premised on applicability of Rule 3(5) was misconceived. The adjudication based on that premise therefore could not stand. [Paras 9]

Show cause notice insofar as it proceeded on the applicability of Rule 3(5) CCR is held to be mis conceived and cannot be sustained.

Use of SION (Standard Input Output Norms) for ascertaining input stocks - Whether SION norms could be applied by Revenue to determine closing stocks of inputs and resultant reversal liability. - HELD THAT: - The Tribunal held that application of SION norms (DGFT Standard Input Output Norms) was not appropriate in the facts of this case. Revenue applied SION norms to estimate inputs allegedly lying unutilised and calculated a reversal amount, but the Tribunal concluded that such norms were not applicable to the appellant's circumstances and could not be the basis for the demand. [Paras 9]

Application of SION norms by Revenue to ascertain closing input stocks and to compute reversal was not appropriate and is rejected.

Reversal under Rule 11 of Cenvat Credit Rules, 2004 on final product becoming exempt - Refund of pre-deposits on successful appeal - Consequences flowing from inapplicability of Rule 3(5) and correct legal provision for reversal when final product becomes exempt; entitlement to consequential relief. - HELD THAT: - The Tribunal observed that Rule 11 of the Cenvat Credit Rules - which was not invoked in the show cause notice - provides for reversal of unutilised cenvat credit in cases where the final product/output becomes exempt. Having found the notice unsustainable for relying on Rule 3(5) and SION norms, the Tribunal allowed the appeal, set aside the impugned order and directed that the appellant is entitled to consequential benefits, including refund of pre deposits, in accordance with law and rules. [Paras 9]

Impugned adjudication set aside; appellant entitled to consequential reliefs including refund of pre deposits, with Rule 11 being the relevant provision for reversal where applicable.

Final Conclusion: The appeal is allowed; the show cause notice and consequent demand and penalty founded on Rule 3(5) and on SION norms are set aside. The Tribunal observed that reversal, if any, falls under Rule 11 of the Cenvat Credit Rules and granted consequential benefits to the appellant, including refund of pre deposits.

Eligibility of CENVAT credit on input services - definition of "input service" under Rule 2(l) of the CCR, 2004 - exclusion of civil construction services from input service - adequacy of reasoning by appellate authority - invoice as statutory document for determining nature of service

Eligibility of CENVAT credit on input services - definition of "input service" under Rule 2(l) of the CCR, 2004 - exclusion of civil construction services from input service - invoice as statutory document for determining nature of service - Validity of disallowance of CENVAT credit on amounts paid for civil works / site-related services and correctness of Commissioner (A)'s conclusion that the services were civil construction and therefore ineligible - HELD THAT: - The original authority examined each invoice and the usage of services and concluded, with reasons, that the services availed (in the nature of site formation, excavation, earthmoving and demolition and maintenance and repair of plant) fall within the definition of "input service" under Rule 2(l) of the CCR, 2004 and are not services specifically excluded as civil construction of a building or civil structure. The Commissioner (A) reversed that finding by a short, unreasoned conclusion that the services were "in the nature of civil construction only" without engaging with or rebutting the detailed findings of the original authority. The Tribunal finds that the invoices refer to maintenance and repair of plant and site-related services rather than construction of buildings or laying of foundations which are excluded, and therefore the original authority's reasoned conclusion that the credit was allowable is correct. The appellate order was set aside for lack of adequate reasoning and for failing to appreciate material findings on the nature and usage of services.

The Commissioner (A)'s order is unsustainable; the Order in Original allowing CENVAT credit is restored and the appellant's appeal is allowed with consequential relief, if any.

Final Conclusion: The Tribunal set aside the Commissioner (A)'s order for lack of adequate reasoning and restored the original authority's reasoned finding that the site related and plant maintenance services constituted "input service" under Rule 2(l) of the CCR, 2004, thereby allowing the appellant's CENVAT credit claim, with consequential relief as applicable.

Non-speaking order - principles of natural justice - recording of reasons - quasi-judicial authority - judicial review and reasoned decisions - remand for fresh decision after opportunity of hearing

Non-speaking order - principles of natural justice - recording of reasons - quasi-judicial authority - Validity of the assessment order dated 20.8.2019 in the absence of recorded reasons and after no effective opportunity of hearing. - HELD THAT: - The court examined the impugned order and found that the assessing authority merely recorded that the dealer had remained present with documents, thereafter computed tax and directed issuance of a demand notice without recording any reasons for the conclusions reached. The petitioner had attended pursuant to notice and produced documents but was not given a further hearing before the order was passed. Relying on established principles that a quasi judicial authority must record reasons and that reasons are indispensable for fairness, accountability and effective judicial review, the court held that the order was both non speaking and violative of the principles of natural justice. Absent reasons, the affected party cannot know the grounds of the decision or frame effective grounds of challenge, and a superior court cannot ascertain what weighed with the authority in reaching its conclusion. [Paras 7, 10, 11]

The impugned assessment order is quashed as a non speaking order in breach of the principles of natural justice.

Remand for fresh decision after opportunity of hearing - Appropriate remedy following quashing of the non speaking assessment order. - HELD THAT: - Having quashed the order for lack of reasons and denial of hearing, the court directed restoration of the matter to the assessing authority for fresh decision. The authority is required to afford the petitioner a reasonable opportunity of hearing, consider the submissions and documents produced, and pass a reasoned order in accordance with law. The remit is for fresh adjudication rather than for mere formal compliance, so that the decision making process records cogent and clear reasons. [Paras 12]

Matter restored to the assessing authority to decide afresh after affording a reasonable opportunity of hearing and to pass a reasoned order.

Final Conclusion: The petition is allowed; the assessment order dated 20.8.2019 is quashed for being non speaking and violative of natural justice, and the matter is remitted to the assessing authority for fresh adjudication after hearing and for passing a reasoned order.

Valuation for entry tax on stock transfer - wholesale value within local area - irrelevance of book sale value for entry tax computation - remand for determination of market/wholesale value

Valuation for entry tax on stock transfer - wholesale value within local area - irrelevance of book sale value for entry tax computation - Proper basis for valuation of cement brought into the local area by way of stock transfer for imposition of entry tax. - HELD THAT: - The Court examined the statutory definition of 'value of goods' under the Entry Tax Act and the method of valuation applicable to goods received by way of stock transfer. It was held that where goods are brought into the local area by stock transfer, the assessing authority must determine the wholesale value of similar goods sold inside the local area (Ghaziabad) at the relevant time, and not adopt the actual sale value recorded in the assessee's books. The assessing authority and Tribunal erred in applying the total sale value recorded by the assessee without attempting to ascertain the wholesale/market value prevailing locally. Because there was no discussion or determination of the wholesale value of similar goods sold within Ghaziabad, the matter could not be finally adjudicated on merits and required fresh determination in accordance with the statutory valuation scheme. [Paras 8, 9, 10]

Assessing authority must value goods brought by stock transfer at the wholesale value of similar goods sold within the local area Ghaziabad; the book sale value is irrelevant; matter remitted for fresh determination.

Final Conclusion: The Tribunal's order confirming entry tax demand is set aside. The matter is remitted for fresh adjudication to determine the wholesale/market value of similar goods sold in the local area Ghaziabad for A.Y. 2007-08, to be completed expeditiously.

Violation of principles of natural justice - concessional rate of tax for consumables and fuels under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 - liability of the selling dealer versus the purchasing dealer for misuse of statutory declaration - inapplicability of decisions under a different State enactment to the Tamil Nadu statute

Violation of principles of natural justice - Assessment set aside on account of breach of natural justice by the Assessing Authority. - HELD THAT: - The petitioner responded to the pre-assessment proposal and sought additional time to rectify and re-present statutory declarations; the Joint Commissioner instructed the Assessing Authority to grant the time sought. Notwithstanding these requests and directions, the Assessing Authority proceeded to complete the assessment without affording the reasonable time granted by the superior officer or permitting the petitioner to furnish the particulars and corrected Forms. The Court noted cooperation by the petitioner and found the conduct of the Assessing Authority to be arbitrary and in gross violation of natural justice, relying on the established principle that assessing officers must not flout directions of their superiors in the conduct of assessments. [Paras 7, 8]

Impugned assessment set aside for breach of principles of natural justice.

Concessional rate of tax for consumables and fuels under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 - liability of the selling dealer versus the purchasing dealer for misuse of statutory declaration - inapplicability of decisions under a different State enactment to the Tamil Nadu statute - Petitioner entitled to concessional rate under section 3(3) of the Tamil Nadu Act for the goods in question; seller not liable for purchaser's misuse of declarations where statutory conditions are satisfied. - HELD THAT: - Section 3(3) of the Tamil Nadu Act grants concessional taxation for sales of goods, including consumables and fuels (except specified items), to dealers for use in manufacture, subject to furnishing prescribed declarations. The Assessing Authority relied on a Supreme Court decision concerning a different State enactment (Kerala) whose provisions (section 5(3) KGST) and explanatory machinery differ materially from the Tamil Nadu provision. A comparative analysis shows the Kerala provision addressed component parts with specific provisos and an Explanation absent from the Tamil Nadu statute, and did not contain the same recovery machinery as section 3(3). This Court relied on its precedents (including Sree Murugan Engineering Products and earlier Bench decisions) which hold that once the seller furnishes the prescribed declarations and the statutory conditions of the Tamil Nadu enactment are satisfied, the manner of utilisation of goods by the purchaser is not ordinarily the seller's concern and any misuse detected should ordinarily fix liability on the purchasing dealer. Applying these principles to the facts and statutory text, the Court held the petitioner meets the conditions for concession under section 3(3). [Paras 11, 14, 16, 18, 21]

Grant of concessional rate under section 3(3) upheld in favour of the petitioner; the Assessing Authority's contrary reliance on the Kerala decision rejected.

De novo finalisation of assessment except as to the conceded legal issue - Remaining aspects of the assessment remanded for de novo finalisation after fresh hearing. - HELD THAT: - Having set aside the assessment for violation of natural justice but having determined the legal issue on entitlement to concession, the Court directed the Assessing Authority to complete the rest of the assessment afresh. The petitioner was ordered to appear for personal hearing on the specified date and no fresh notice was required; after hearing and considering materials, the Assessing Authority is to pass a fresh assessment order in accordance with law within six weeks from conclusion of the personal hearing. [Paras 9, 23]

Assessment remitted for de novo finalisation on all issues save the conceded legal entitlement which shall be given effect to by the Assessing Authority.

Final Conclusion: Writ petition allowed: the impugned assessment for 2003-04 is set aside for breach of natural justice; the petitioner's entitlement to concessional tax under section 3(3) of the Tamil Nadu General Sales Tax Act, 1959 is declared; the remaining matters are remitted to the Assessing Authority for de novo finalisation following personal hearing, to be concluded within the time directed.

Offence under Section 138 of the Negotiable Instruments Act - Presumption under Section 139 of the Negotiable Instruments Act - Requirement of an operative bank account at the time of cheque issuance - Cognizance and summoning in a complaint under the Negotiable Instruments Act - Closure of bank account as a factual defence necessitating trial

Offence under Section 138 of the Negotiable Instruments Act - Requirement of an operative bank account at the time of cheque issuance - Closure of bank account as a factual defence necessitating trial - Cognizance and summoning in a complaint under the Negotiable Instruments Act - Validity of cognizance and maintainability of the complaint under Section 138 where the drawer contends the bank account was closed prior to issuance of the cheque - HELD THAT: - The High Court examined the averments, the pre-summoning affidavit and the bank return memo and found that factual disputes regarding whether the account was closed prior to issuance of the cheque, when the account was closed, and whether the cheque was subsequently filled in by the complainant, could not be resolved at the pre-trial stage. The impugned communication relied upon by the petitioners did not expressly state that the account from which the cheque was drawn had been closed, and the bank return memo indicating the remark 'account closed' did not specify when the account had been closed. Given these disputed factual questions, and having regard to the presumption arising under Section 139 where a signed cheque is shown to have been issued, the Court held that there was no infirmity in the Trial Court's order taking cognizance only against the proprietor accused. The correctness of the defence that the account was already closed and related contentions must be adjudicated on trial; they are not suited to quashment at the cognizance stage. [Paras 14, 15]

Petition seeking quashing of the complaint and the cognizance order is declined; cognizance taken against the proprietor accused under Section 138 is upheld and factual defences left open for trial.

Final Conclusion: The High Court declined to quash Complaint No.6337/2019 or the cognizance order dated 01.05.2019; the Trial Court's taking of cognizance against the proprietor accused under Section 138 NI Act is sustained and contested factual issues (including alleged prior closure of the bank account) are to be decided at trial.

Maintainability of prosecution under Section 138 read with Section 141 of the Negotiable Instruments Act - vicarious liability - arraigning the company/partnership firm as an accused as a precondition for prosecuting directors/partners under Section 141 - quashing of process under Section 482 Cr.P.C. for non-joinder of necessary party

Arraigning the company/partnership firm as an accused as a precondition for prosecuting directors/partners under Section 141 - vicarious liability - maintainability of prosecution under Section 138 read with Section 141 of the Negotiable Instruments Act - Whether the process issued against the applicant could be sustained when the drawer-company/partnership firm was not impleaded as an accused despite the cheques being drawn in the company's/firm's name and the applicant being alleged to act in that capacity. - HELD THAT: - The Court held that Section 141 operates on the principle of vicarious liability and that prosecution of persons such as directors or partners presupposes that the corporate or firm entity, whose commission of the offence is a condition precedent, is arraigned. Reliance was placed on the ratio in Aneeta Hada as applied and followed in Philip J. v. Ashapura Minechem Ltd., and the Court observed that the same rationale extends to partnership firms where partners are sought to be prosecuted on vicarious liability grounds. In the facts before the Court the cheques were drawn by a company (NHA Investment Consultancy Pvt. Ltd.) and the applicant's role was alleged in the capacity of managing director; the company was not made a party to the complaint. For these reasons the issuance of process against the applicant alone could not be sustained and warranted quashing under the Court's inherent jurisdiction. [Paras 12, 13, 14, 15]

The process issued against the applicant alone on 15.02.2018 in CC No. 11312/SS/2017 for offences under Section 138 read with Section 141 of the NI Act, without joining the company, is quashed and set aside; the complainant is permitted to seek appropriate relief before the competent court and may apply under Section 14 of the Limitation Act for exclusion of time.

Final Conclusion: Criminal Application allowed; process issued against the applicant under Section 138 read with Section 141 of the NI Act (without joinder of the company/firm) quashed and set aside, with liberty to the complainant to approach the competent court and seek appropriate relief including an application under Section 14 of the Limitation Act.